Rhabdomyosarcoma (RMS) is the most common soft-tissue sarcoma that mainly affects young children. Patients with the embryonal (ERMS) subtype have better survival rates and effective treatment options. However, patients with the alveolar (ARMS) subtype have very poor outcomes and desperately need new therapy options. Similar to some other pediatric sarcomas and leukemias, ARMS contains tumor-specific chromosomal translocations that code for chimeric transcription factors. Approximately 60% of ARMS patients have PAX3-FOXO1 fusion protein as the product of tumor specific chromosomal translocation. The fusion protein represents an ideal molecular target because it is expressed only in tumor cells and it has acquired a unique oncogenic function that is absent in parental full-length molecules, PAX3 and FOXO1. Inhibition of fusion protein expression in experimental systems induced differentiation and chemosensitivity. We hypothesized that small molecules, which can directly bind to PAX3-FOXO1 protein can inhibit its oncogenic function. Small molecules with this ability may be developed as therapeutic agents in future applications. We used surface plasmon resonance technology in a Biacore 4000 instrument to screen small molecule libraries for compounds that can bind directly to recombinant PAX3-FOXO1 protein. We identified 119 primary hits, which were further tested in a PAX3-FOXO1 responsive reporter assay to narrow down to 9 potential inhibitor molecules. In this application we propose to confirm direct binding of hit compounds to the fusion protein and validate potential lead compounds in functional assays that focus on transcriptional activity of PAX3-FOXO1. We will also investigate the molecular mechanism of PAX3-FOXO1 inhibition based on known regulatory processes involving PAX3-FOXO1. There have been very little advances in the treatment of ARMS in the past 35 years. Trying different combinations of existing cytotoxic agents did not significantly improve the survival. Here we propose a novel approach with potential to discover the first targeted therapy for ARMS.